Disney and Fox – the deal no one thought would ever be made

Disney and Fox wheeling and dealing with one another? Laughable, even a year ago. Now, its one step away from reality.

In 1990, The Walt Disney Company and the Fox Broadcasting Network battled one another over early fringe afternoon time slots over kids animation: The Disney Afternoon (consisting of DuckTales, Chip n’ Dale Rescue Rangers, Tale Spin, etc.) was expanding to two hours and Fox was mounting its own effort through Fox Kids. Disney sued Fox, fearing it would be forced to break up the block on 64 Fox affiliates as a result. A lot was at stake: at the time kids animation was a very profitable business at the time and fueled young viewership into prime access and primetime on many independent and Fox stations.

Running the studios at the time were Barry Diller of Fox and Michael Eisner of Disney – two former co-workers at ABC and Paramount turned cutthroat competitors who were engaged in a heated rivalry.

Flash forward to today – the media landscape has changed drastically. The kids syndication business has long been dead as profits dried up and the next generation of kids viewers went elsewhere, if they even watch TV at all. Cable TV expansion and streaming options have decimated the broadcasting industry. And companies – many of them long-time enemies – are now pairing up to survive.

Which brings us to The Walt Disney Company and 21st Century Fox. The two longtime rivals are now in talks for a possible transaction involving the latter’s movie studio, television production operations, and huge library. On Friday, several trades reported both companies were working on “the fine print” amid reports talks started up again and were progressing.

A deal could be announced as soon as Thursday. So here’s a detailed breakdown in what could happen, and the effect the outcome could have on the entertainment industry.

Theatricals. Perhaps the group who would be (and only be) excited about this sale would be comic book fans, especially X-Men fanatics, who would see the movie franchise reunite with Marvel. Fox obtained the movie rights to X-Men and Fantastic Four through Marvel, before the latter was acquired by Disney in 2009.

As for the rest of the movie business, a combined Disney/Fox would wind up owning 39 percent of the marketplace – with brands Pixar, Marvel, Lucasfilm, Blue Sky (Ice Age), and others.  Fox’s Avatar would get some mileage from Disney as it uses the property to launch new exhibits at its theme parks.

And of course, Disney now has the Star Wars franchise, once a Fox property. A sale would reunite the entire film library, as Fox soon would have rights to only one Star Wars movie – A New Hope, the first Star Wars movie released in 1977.

Recently, 20th Century Fox announced plans for a Bob’s Burgers movie, based on the hit animated TV show for 2020, and a second Simpsons movie is also a possibility. No telling how the sale would effect these projects.

Management. There is really too much to analyze here, given we see network execs come and go all the time. Fox’s Dana Walden and Gary Newman have run Fox for the last four years and 21st Century Fox’s TV operations for more than fifteen years. Walden and Newman have been known for making many head-scratching moves (letting American Idol go to ABC, for one) and where would they fit in the Disney chain is anyone’s guess – or if they would be employed by Disney at all.

First- run syndication. This is the most difficult to analyze. There is no word on how a Fox-Disney deal would impact their respective syndication outfits – Twentieth Television and Disney-ABC Domestic Television Distribution, once known as Buena Vista Television. The former launched Page Six TV and Top 30 this fall and also has Dish Nation and Divorce Court and numerous off-network sitcoms and dramas. Disney has a smaller portfolio, with Live with Kelly and Ryan, Who Wants To Be A Millionaire, Right This Minute, and the limited-market Pickler and Ben as their only first-run shows. Off-network is scarce, with black-ish coming next fall and currently has weekend hours Castle and Scandal.

Fox Television Stations – which is not part of the deal and consists of 28 stations in 17 markets (including WFLD and CW affiliate WPWR) have been testing shows during the summer to see if future projects have any potential. One project (iWitness) was launched by Debmar-Mercury, so we may see more coming from non-Fox syndicators. On the other hand, if Fox develops programming from within its station group (like they did with Minnesota-based talker The Jason Show), they may have to contact an outside syndicator to handle sales since Twentieth could no longer be available.

Ironically, Twentieth’s first-run shows doesn’t take up too much real estate on Fox-owned stations to begin with. Much of Fox’s non-prime schedule is filled with product from other syndicators – for example, Warner Bros.’ TMZ, TMZ Live, The Real, and Big Bang Theory reruns fill up hours of slots on both WFLD and WPWR.

No changes are expected for MyNetworkTV, also not part of the deal.

Primetime. Fox of course, was the first network to skim past the now-defunct fin-syn rules by programming fifteen primetime hours or less so it wouldn’t have to divest its lucrative studio. With the production arm separating, Fox would lose the advantage of having a studio to mooch off of. With that said, primetime – at least in the future – could look radically different than we see it now.

It remains to be seen if the deal would impact current shows on Fox’s lineup, notably long-running hits The Simpsons and Family Guy. Starting the same year Fox and Disney sued each other over afternoon time periods, Simpsons could be too expensive for the new Fox as they would have to pay a license fee since it would no longer be an in-house production, forcing the long-running cartoon to end unless it relocates to ABC. The Simpsons are renewed at Fox through 2019.

Also remaining to be seen if Fox renews its affiliation agreement with Sinclair Broadcasting, or opt to go with Ion Media stations instead. A slimmed-down Fox could alter negotiations.

Cable. Fox owns FX and FXX, home to some of television’s most-acclaimed series: Fargo, You’re The Worst, Married, and others. These shows feature a lot of adult content and fits the brand well.

On the other side of the spectrum, Disney’s cable networks (aside from ESPN) target younger audiences: Disney XD is a magnet kids; The Disney Channel for teenagers (mostly female); and Freeform (formerly ABC Family), whose target audience is women 18-34. In 2002, Disney acquired the old Fox Family Channel and relaunched it as ABC Family.

As reported here last week, Fox is considering selling Fox Sports’ regional sports networks to Disney, which may give them an opportunity to reach local sports fans.

Library content. If Disney buys 21st, the Mouse House would have over 10,000 hours of programming – much of it from Twentieth’s library including the 1966-68 ABC series Batman, itself in a rights issues struggle over the years (Warner Bros. and DC Comics owns almost everything else associated with the Caped Crusader.) Other series Twentieth has include Land of the Giants, M*A*S*H, How I Met Your Mother, L.A. Law, and King of the Hill, among others.

Disney would contribute a much smaller portfolio as the company historically shied away from TV production – the only show it produced for network TV before 1984 was a weekly anthology hour known under numerous names (Disneyland, Wonderful World of Disney, etc.) Disney formed Touchtone Television the same year and hit the jackpot in 1985 with The Golden Girls. Its success spurred Touchtone (now ABC Studios) to launch numerous hit sitcoms and dramas, such as Empty Nest, Home Improvement, Boy Meets World, Desperate Housewives, Lost, Criminal Minds (with CBS), and Marvel’s Agents of Shield.

The library would be perfect for Disney’s new over-the-top service, scheduled to launch in 2019. Many of these shows are currently unavailable for streaming and some (such as L.A. Law) haven’t been seen anywhere in years. Bring these shows to the streaming service would be great for classic TV fans, provided rights issues get worked out.

Both studios have massive film libraries, but it is unclear how much a role they would play in Disney’s new streaming service. Disney has historically been protective of its classic movies; much of its home video releases in the 1980s and 1990s were on sale for “a limited time”, annoying and anti-consumer as it was.

Streaming. Disney would become majority owner of Hulu should they buy Fox with a 60 percent stake. Would they sell it to Comcast (another minority owner) to focus on their own OTT service? Only time will tell.

Labor. Now comes the bad news. With a bigger company comes bigger labor problems. And many back-office positions – in administration, marketing, sales, etc. are likely to be eliminated due to duplication. And the sale would concern Hollywood unions – notably the Writer’s Guild of America, who nearly went on strike this year. The current pact expires in 2020, and if you thought negotiations were tough the last time around, you haven’t seen nothing yet.

Local TV. Homer Simpson doing the weather on ABC 7? Louise Belcher crashing the Magnificent Mile Lights Festival? Don’t look for it. Typically, local news stations avoid synergy with entertainment product not matching its target audience, usually the 25-54 demo. Mickey Mouse and Minnie are family-friendly characters kids associate with – for all intent and purposes, there is nothing family-friendly (in the traditional sense) about Fox’s animated shows so forget about Bart Simpson “Doing the Bartman” at the Lights Festival (and besides, “Bartman” has a different meaning in Chicago if you ask any Cubs fan.)

Of course, there are a lot of hoops to go through before this becomes a reality. Even though the FCC isn’t likely to be involved (as Fox’s owned stations aren’t part), the Justice Department would be – and it has already blocked the AT&T-TimeWarner deal on anti-trust grounds requiring them to sell either DirecTV or CNN. Would 21st Century Fox and Disney have a similar problem? With Disney’s ABC News already in President Trump’s doghouse (as with CNN), there is no guarantee a deal would go through.

In case you’re wondering about how the Disney/Fox lawsuit panned out, it was settled a few years later, as Disney’s programming moved to other independent stations and later to the former UPN (under different branding) in 1999. Around the same time, Fox affiliates wanted out of the afternoon kids business as it was no longer profitable, so Fox dropped the daily block in 2001 as Fox Kids was sold to….The Walt Disney Company.